Getting a Mortgage for Non U.S. Citizens

For many foreign-born individuals living in the United States, owning a home is one of the cornerstones of the American dream. But there’s a conception among some non-U.S. citizens that there’s no way they can obtain a mortgage, thus creating a huge barrier to that goal. In fact, the National Association of Realtors estimates that 60% of homes purchased by international buyers were all-cash transactions, as opposed to just one-third of domestic sales.

Certainly, buying a home can present certain challenges if you’re not a citizen. But the reality is that many lenders are willing to extend credit to non-citizens – sometimes without a credit history in the United States. Non-citizens can even qualify for government-insured mortgages, which have the advantage of requiring low down payments.

One point to keep in mind is that the requirements for getting a home loan depend in large part on one’s residency status. Most borrowers tend to fall within one of the following groups:

• Permanent residents with a green card (Form I-551)
• Non-permanent residents with a valid work visa (E1, E2, H1B, H2A, H2B, H3, L1 and G1-G4)
• “Foreign nationals,” whose primary residence is not in the U.S.

Generally, it’s much easier to get a loan if you fall into one of the first two categories. That’s because mortgage giants Fannie Mae and Freddie Mac – which buy the majority of home loans on the secondary market – have pretty much the same guidelines for green card and work visa holders as anyone else. The main caveat is that the lender has to verify the legal residency of the applicant. (See Getting A U.S. Visa For Entrepreneurs & Investors for some routes to legal residency.)

However, foreign nationals don’t conform to Fannie or Freddie standards, so lenders have to keep these loans on their own books. Because the bank assumes more risk this way, it’s more likely to require a substantial down payment. 

Keep in mind that the Federal Housing Administration, which has relatively low credit score requirements and insists on just 3.5% down, is another option for non-U.S. citizens. It offers the same loan terms as it does to other buyers, provided the borrower shows proof of permanent residency in the U.S. (see Understanding FHA Loans).

If you’re a non-permanent resident seeking an FHA mortgage, you have to use the home as a primary residence and supply a valid Social Security number and Employment Authorization Document. This means that the agency does not extend mortgages to non-residents just planning to use the home occasionally.

The main obstacle to getting any mortgage is proving to the lender that you fit its risk profile. That means providing your employment history, credit history and proof of income. For U.S. citizens, this is a relatively straightforward process, because most have a credit trail in the United States and a backlog of W-2 forms and tax returns that show their earnings over the years.

But things get a little trickier for someone who hasn’t been in the country all that long or doesn't live in the U.S. most of the time. For example, how do you prove your creditworthiness if you don’t have a credit report from the three major bureaus: Equifax, TransUnion and Experian? 

You have a definite advantage if you have an existing relationship with an international bank with branches in the U.S. It will have a record of your finances already, so it  may be more willing to take a bet on you, even without an American credit report. Fortunately, the mortgage industry is dominated by large, global banks, so there’s a good chance you’ve had accounts with one of them in the past.

Also, some lenders may be willing to order international credit reports as a substitute for the three major U.S. bureaus. However, this can be an expensive process, and one that’s generally only available for residents of Canada, the United Kingdom and Ireland. 

If you don’t have a credit history in the U.S., you have another reason to give FHA loans some thought. The FHA  doesn't require a credit report and accepts non-U.S. tax returns as proof of employment. 

Some lenders will make borrowers go through more hoops than others to get a loan, so you can eliminate a lot of headaches by identifying ones that frequently work with non-U.S. citizens. If you’ve done business with an international bank that operates here, that’s probably the place to start.

Credit unions are another alternative. These nonprofit financial service providers tend to offer extremely competitive rates and, depending on their location, may have special lending programs for green card and visa holders. 

Many banks and mortgage companies offer conventional and FHA home loans to non-U.S. citizens, provided they can verify their residency status, work history and financial track record. Lenders that work with this population extensively tend to be more flexible with the documentation you need. For more on how U.S. mortgages work, see Investopedia's tutorial Mortgage Basics.